Transacting in a Cultural Industry (a Theoretical Examination of the Relevance of Transaction Cost Economics to the Analysis of Inter-firm Relationships within the Popular Music Industry)

This theoretical paper examines the transaction cost framework as described by its main proponent in the context of the popular recorded music industry. We take the two firm typologies within the industry, major and independent, and discuss whether TCE variables can identify suitable governance structures for managing the transactions between them. We argue that asset idiosyncrasies such as cultural knowledge and reputation, and the nature of the non-linear causally ambiguous creation of cultural product create a climate that militates against TCE's ability to identify the optimal governance structure.